When starting, growing, and running a business, which comes first, the Purpose or the Profit?
Richard Branson, a hero of modern-day free enterprise capitalism, says in one of his many famous quotes:
If you aren’t making a difference in other people’s lives, you shouldn’t be in business – it’s that simple.”
But Milton Friedman, a much-maligned hero of free enterprise capitalism, in his infamous 1970 New York Times article, writes:
…the moral purpose of business is to maximize profits for shareholders.
Is it possible that both Friedman and Branson are right? I argue wholeheartedly yes, let Purpose and Profit Unite.
This is the first of a series about what I call the Purpose and Profit conundrum. For context I am a Conscious Capitalist. My son Kyle and I founded for profit MAC6 with a purpose Advocating Capitalism as a Force for Good. We also co-founded the nonprofit Conscious Capitalism Arizona, as part of the now global Conscious Capitalism movement, dedicated to Elevating Humanity through Business.
For the past 10 years I have lived and taught the four principals of Conscious Capitalism: Higher Purpose, Stakeholder Orientation, Conscious Leadership and Conscious Culture. With respect to Higher Purpose, for 10 years I have taught the conscious capitalism mantra that profits are a byproduct, best achieved by NOT making them the primary goal. I now believe we got it wrong, Purpose and Profit must Unite, and be pursued with equal vigor.
As a corollary to Branson’s quote – if you are making a difference in people’s lives you SHOULD be in business. You may or may not be feel like you are changing the world, but butchers, bakers, taxi drivers, auto mechanics, dog groomers, Uber / Lyft drivers, Door Dashers and more – if you are making even a very small positive difference in people’s lives you are changing the world for the better and you should be in business.
In the language of Conscious Capitalism, we call profit a byproduct, and while I get it on an intellectual level, I call that language a mistake. Profit is not a byproduct, money and profit are the life blood of any business, and, like it or not, more money and more profit are the only way to achieve your purpose, higher or not.
A too common misconception is that profit has one purpose, to benefit the financial shareholders of the business. I argue that profit has two essential purposes:
- Profit is the fuel, the life blood that drives growth of the business AND the business purpose. More profit means more business, more business means more profit, and on and on it goes. Maximum Profit = Maximum Purpose.
- Shareholders risk their capital, so they ultimately deserve a share of the profit, but it’s also true that shareholders eat last, and that Maximum (long term) Purpose also equals Maximum (long term) Profit.
In the language of Conscious Capitalism maximizing profit is a sin, but in my mind, both Branson and Friedman win.
- Branson: A successful business requires a purpose – check the box let’s all agree
- Friedman: Yes, let’s maximize long term profits, fueling the higher purpose, a society and shareholder win / win.
Look for more on this topic in the coming weeks. Without apology to my many conscious capitalist friends, I am a wholehearted profit maximizer, and with love in my heart I say the Conscious Capitalism model is wrong.
Both Higher Purpose and Higher Profit are the united focus of a successful business. And we achieve both higher purpose and higher profit through the how of Stakeholder Orientation, Conscious (aware) Leadership and Conscious Culture (driven by values).